Fannie Mae (Condo vs PUD)

[Douglas Mackay]

I would appreciate some clarification on how you determine the difference between a condo and a PUD for Fannie Mae purposes. I have attached the Fannie Mae definitions from the 2007 Sellers Guide for both condos and PUDs and the definitions of both from GMAC's underwriting manual.

The seller's guide states "A condominium project is one in which individual owners hold title to units in the project along with an undivided interest in the real estate that is designated as the common area for the project."

and "A planned unit development is a project or subdivision that consists of common property and improvements that are owned and maintained by an owners’ association for the benefit and use of the individual units within the project. For a project to qualify as a PUD, the owners’ association must require automatic, nonseverable membership for each individual unit owner, and provide for mandatory assessments. Zoning should not be the basis for classifying a project as a PUD."

I have a property in which the owner's own 50% undivided interest in the common elements (there are only two units in this project). Based on the above definition, it appears that this property is a condo (as the owners own the interest in the common elements and not the HOA). However, the lender says it's a PUD and will cancel the order unless I report it as a PUD.

Talking to an underwriter friend at GMAC (not the lender in question) also agrees that the subject is a PUD by their underwriting quidelines.

I have a call into Fannie Mae for clarification on their definition, but have not heard from them yet.

Any comments from the gallery would be greatly appreciated!

 

[Ken B]

How is the property recorded? Is there a Declaration of Condominium (Condo) or Covenants, Conditions, and Restrictions (PUD)

If a CCR is recorded, FNMA only classifies the development as a PUD if membership in POA/HOA is mandatory and membership requires a POA/HOA fee to be paid.

 

[Douglas Mackay]

Recording

The property's legal description reads, "Lazy M Townhomes, Unit B, Together with an undivided 50% interest in the common elements..."

There is also a recorded Declaration of Unit Ownerhip and By-Laws for this project.

 

[Rick Johnson]

What is the Lender relying on to identify it as a PUD?

 

[Douglas Mackay]

What is the Lender relying on to identify it as a PUD?

...the title report, showing it as a townhome.